In re Thrall, Bankruptcy No. 95-19131 DEC. Adversary No. 95-1727 MSK.
| Decision Date | 28 May 1996 |
| Docket Number | Bankruptcy No. 95-19131 DEC. Adversary No. 95-1727 MSK. |
| Parties | In re Jeanne Lamar THRALL, SSN XXX-XX-XXXX, Debtor. FIRST OMNI BANK, N.A., Plaintiff, v. Jeanne Lamar THRALL, Defendant. |
| Court | U.S. Bankruptcy Court — District of Colorado |
COPYRIGHT MATERIAL OMITTED
Dale L. Fischer, Aurora, CO, for debtor.
Janice A. Steinle, Trustee, Littleton, CO.
THIS MATTER comes before the Court on the Motion of First Omni Bank, N.A. (Bank) for Clarification or to Alter or Amend Judgment (Motion). Appearing for oral argument on May 14, 1996 was Paul G. Urtz of Stutz & Miller on behalf of First Omni Bank, N.A. In the Motion, the Bank seeks clarification or modification of the Order on Motion for Default Judgment and Judgment (collectively referred to as Judgment) entered in this matter. Having reviewed the Motion, the Bank's brief, and considered counsel's oral argument, the Court clarifies but declines to modify the Judgment.
As to determination of dischargeability of a debt, this Court has jurisdiction pursuant to 28 U.S.C. § 1334(b), and this proceeding is a core matter pursuant to 28 U.S.C. § 157(b)(2)(I).
1. On September 6, 1995, Jeanne Lamar Thrall (Debtor) filed a voluntary petition for relief under Chapter 7. The Bank filed its Complaint to determine dischargeability under 11 U.S.C. § 523 on November 22, 1995.
2. The Complaint states two claims. Claim I alleges that the Debtor is indebted to the Bank on a credit card account which had a balance on the date of the bankruptcy filing of $5,477.23 (credit card debt) and that such debt is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). In specific, the Bank contends that the credit card debt was obtained through false pretenses, false representation, or actual fraud because at the time the charges were incurred the Debtor knew that she was unable to and did not intend to pay them. Claim II alleges the credit card debt is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(B) because credit was extended in reliance upon the Debtor's false financial statement. The prayer in the Complaint requests that the Court determine that the credit card debt is nondischargeable and enter a money judgment in the amount of $5,477.23 plus interest, attorney fees, and costs.
3. No Answer was timely filed. On January 5, 1996, the Bank filed a verified Motion for Entry of Default Judgment (Default Motion) requesting entry of a nondischargeable money judgment in the amount of $6,122.23 (inclusive of attorney fees and costs), plus interest thereon at the legal rate.
4. Neither the Complaint nor the Default Motion specifies what portion of the credit card debt was "obtained by fraud" under § 523(a)(2)(A) or (B).
5. On January 16, 1996, this Court entered an Order on the Default Motion granting it, in part, and denying it, in part. The Order reads:
Default judgment is hereby entered in favor of the Plaintiff and against the Defendant, Jeanne Lamar Thrall, such that the debt of Jeanne Lamar Thrall to First Omni Bank, N.A., in the amount of $6,122.23 is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(B). The Plaintiffs request that the Court award post-judgment interest is DENIED.
On the same date including the same language, the Court entered its written Judgment.
6. Thereafter, the Bank filed the instant Motion requesting that post-judgment interest be awarded pursuant to 28 U.S.C. § 1961(a).
The Bank requests that the Court modify the Judgment to include an award of post-judgment interest pursuant to 28 U.S.C. § 1961(a) which provides that "interest shall be allowed on any money judgment in a civil case recovered in a district court". The Bank contends that a bankruptcy court is a unit of a district court pursuant to 28 U.S.C. § 151 and therefore it is authorized to award interest on its judgments.
Although the Bank's argument is brief and straightforward, it opens Pandora's box with regard to entry of money judgments on nondischargeable debts, especially when the request for judgment follows a debtor's default. The explicit issue raised in the Motion is whether the Judgment should include post-judgment interest, but the Motion raises a second, implicit issue as well. That is, whether a money judgment can be entered by a bankruptcy court on a debt determined nondischargeable under 11 U.S.C. § 523.
The Bank is correct that 28 U.S.C. § 1961(a) applies to some judgments entered by bankruptcy courts. Woolfson v. Doyle, 180 F.Supp. 86 (S.D.N.Y.1960) (); Langenkamp v. Moore (In re Republic Financial Corp.), 75 B.R. 840 (Bankr.N.D.Okla.1987), later proceeding, 128 B.R. 793 (Bankr.N.D.Okla.1991) (); Gilbert v. Suburban Athletic Club (Matter of Dayton Circuit Courts No. 2), 80 B.R. 434 (Bankr.S.D.Ohio 1987) (). However, judgments which do not involve a monetary award are not subject to 28 U.S.C. § 1961. Declaratory judgments determining rights in the bankruptcy process rather than a damage award are not money judgments. For example, interest under 28 U.S.C. § 1961 is not applicable to the allowance of attorney fees as an administrative expense in a bankruptcy case. St. Paul Fire & Marine Ins. Co. v. Vaughn, 779 F.2d 1003, 1010-11 (4th Cir.1985).
No post-judgment interest is awardable because the Judgment is a declaratory rather than a money judgment. The Judgment simply determines that a debt is nondischargeable and quantifies it. John Deere Co. v. Gerlach (In re Gerlach), 897 F.2d 1048, 1052 (10th Cir.1990).
The implied issue raised by the Motion and by this Court's entry of a declaratory judgment is whether a bankruptcy court can enter a money judgment on a nondischargeable debt. This issue is the subject of some debate and there is little guidance in this circuit.1
It is the practice of many, if not most, bankruptcy courts to enter money judgments against a debtor if a debt is determined to be nondischargeable. The practice undoubtedly stems from experience under the Bankruptcy Act. Section 17(c)(3) of the Act required a bankruptcy court not only to determine dischargeability of a debt, but also to enter judgment and make necessary orders for its enforcement. Section 17(c)(3) of the Act provided:
After hearing upon notice, the court shall determine the dischargeability of any debt for which an application for such determination has been filed, shall make such orders as are necessary to protect or effectuate a determination that any debt is dischargeable and, if any debt is determined to be nondischargeable, shall determine the remaining issues, render judgment, and make all orders necessary for the enforcement thereof.
When the Bankruptcy Code was enacted, most anticipated that this same procedure would continue. See Cope v. Cope (In re Cope), 35 B.R. 287, 288 (Bankr.W.D.Mich. 1983). For most courts and creditors the practice of entering a money judgment on a nondischargeable debt is standard operating procedure. However, courts recently have expressed reservations as to whether a bankruptcy court can or should enter a money judgment on debts determined to be nondischargeable.
Those courts which conclude that a bankruptcy court may enter money judgments on nondischargeable debts do so largely based on past practice and interests of judicial economy. But with all due respect, these opinions do not analyze the language of the Code and Rules, the differences between the determination of discharge under the Act and the Code, the current jurisdictional grant to bankruptcy courts, or the interplay between the bankruptcy and state judicial processes. See Longo v. McLaren (In re McLaren), 3 F.3d 958, 965 (6th Cir.1993); N.I.S. Corp. and Ozark Life Ins. Co. v. Hallahan (Matter of Hallahan), 936 F.2d 1496, 1508 (7th Cir. 1991); Citibank (South Dakota), N.A. v. Fisher (In re Fisher), 186 B.R. 70, 71 (Bankr.E.D.Tex.1995); Itano Farms, Inc. v. Currey (In re Currey), 154 B.R. 977, 978-80 (Bankr.D.Idaho 1993); Snyder v. Devitt (In re Devitt), 126 B.R. 212, 215-16 (Bankr. D.Md.1991). These cases approve entry of a money judgment because quantification of a nondischargeable debt is integral to the determination of dischargeability and bankruptcy courts, as courts of equity, should resolve all of the issues in the dischargeability controversy. The foundation of this reasoning is the well-known maxim that once equitable jurisdiction has been properly invoked it will proceed to render a full and complete disposition of the controversy. Porter v. Warner Holding Co., 328 U.S. 395, 399, 66 S.Ct. 1086, 1089-90, 90 L.Ed. 1332 (1946); Alexander v. Hillman, 296 U.S. 222, 242, 56 S.Ct. 204, 211, 80 L.Ed. 192 (1935). The maxim is bolstered by the policy favoring conservation of judicial resources by avoiding duplication of effort and multiplicity of suits. When addressed, the jurisdictional basis for the money judgment is the bankruptcy court's core equitable authority to determine dischargeability. Devitt, 126 B.R. at 216.
Courts which have declined to enter money judgments on nondischargeable debts reason either that entry of a money judgment on a nondischargeable debt falls outside a bankruptcy court's core jurisdiction or that entry of a money judgment is an award of damages which may give rise to a Seventh Amendment right to a jury trial. See Schieber v. Hooper (In re Hooper), 112 B.R. 1009, 1012-13 (9th Cir. BAP 1990); Barrows v. Illinois Student Assistance Comm'n (In re Barrows), 182 B.R. 640, 652-53 (Bankr.D.N.H.1994); Manufacturers Hanover...
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